By Daniel Goh
1MDB vs Perwaja Steel
(a) 1MDB was set up to take over power generating assets owned by IPPs which have collectively made profits in excess of RM50 billion since 1993 due to lopsided Power Purchase Agreements as well as to ensure reliable long term electricity supply to meet the country’s industrial and commercial needs at a price which the Rakyat can afford to pay. 1MDB’s market is domestic, ready and growing where a lowering of tariffs due to elimination of existing PPAs will benefit domestic consumers and taxpayers.
(b) Perwaja Steel was a politically conceived, commercially questionable and poorly executed enterprise set up to compete with more efficient foreign manufacturers based on protection from competing imports in the form of both tariffs and quotas. Perwaja Steel’s competitors are international manufacturing outfits in an industry where advantages of economies of scale far outweighs the disadvantages of tariffs and quotas the imposition of which will lead to higher costs for domestic users of steel.
2. FUNDS INJECTED BY THE GOVERNMENT
(a) The government has injected a total of RM1 million into 1MDB since its inception in 2010.
(b) From 1982 until its privatization in 1996, a total of more than RM15 billion, including RM130 million in loans from EPF was injected into Perwaja Steel. This works out to an equivalent of RM33 billion at today’s rate.
3. Criminal Culpability
(a) As of date, there has been no formal criminal charge of fraudulent wrongdoing brought against 1MDB or any of its directors, management or staff. Neither its external auditors or the Auditor-General has to date foun any discrepancies in its accounts.
(b) A report prepared by Perwaja Steel management in 1995 alleged that former Perwaja Steel CEO, Eric Chia
- fraudulently engaged in inaccurate accounting records
- awarded unauthorised contracts amounting to hundreds of millions of RM
- misappropriated company funds
- awarded dubious maintenance contracts amounting to RM292 million
(including a contract amount of RM200,000 per month to a company for gardening, cleaning and vehicle maintenance)
- awarded RM957 million of contract to companies of a long time associate of Eric Chia.
Eric Chia was eventually charged for dishonestly authorizing (not pocketing) a payment of RM76 million (0.076 billion) in 2004. This only happened after Mahathir stepped down as PM and Badawi took over but miraculously acquitted in 2007 as Mahathir stepped up his efforts to remove then PM Abdullah Ahmad Badawi
4. LOSSES INCURRED
(a) To date, no financial loss has been attributed to 1MDB either realized or on paper
(b) The Government had to write off its entire investment in Perwaja Steel. In 2002, Mahathir himself admitted to a loss of more than RM10 billion.Actual losses to taxpayers is estimated to be more than RM15 billion excluding losses incurred after Perwaja Steel was privatised in 1996 and the more than RM1 billion owed to Petronas and TNB.
5. GOING FORWARD
(a) 1MDB is still a going concern 100% owned by Ministry of Finance with debts amounting to RM38 billion and audited assets valued at RM46 billion based on firesale valuation. It is currently undergoing financial restructuring and rationalization plans to reduce it debts via disposal of non core assets. This rationalization exercise is expected to be completed by February 2016 and 1MDB is expected to emerge as a leaner and more efficient entity focussed on its core activities of power generation and development of TRX and Bandar Malaysia as KL’s second financial district and suburban lifestyle dwelling with excellent transportation connectivity respectively.
(b) Perwaja Steel has no forward to go to, it’s game over, kaput. If it has any future, it doesn’t belong to malaysians anymore. Perwaja Steel was privatised in 1996 and sold to Maju Group. At the time of privatization, on top of writing off all its investments, the Malaysian taxpayers through our government, led by YAB Tun Mahathir bin Mohamad had to underwrite a further RM2.76 billion in Perwaja Steel’s debts to third parties. This did not stop Perwaja Steel from incurring further losses and acquiring debts. In November 2013, Perwaja lapsed into Practice Note 17 status – a category for cash-strapped companies.
In July this year Perwaja Steel announced a deal to sell a 64% stake to China’s Tianjin Zhiyuan Investment Group Co Ltd thus ending 33 years of National Shame if finally the deal and is completed.
Have we even started on the other scandals yet?
(1) Bank Bumiputra
(2) Maminco-Makuwasa Affair
(3) RM30 billion forex loss
So you see Che Det is actually not very cerdik (smart). BeGo (senile) would be a far more appropriate nickname his sisters should have given him.